Toyota to produce Prius in U.S.

A Tundra truck is inspected at Toyota manufacturing plant in San Antonio, Texas, in November 2006.

DETROIT  Toyota Motor Corp. will start producing the hybrid Prius in the U.S. for the first time as the Japanese automaker adjusts its U.S. manufacturing operations to meet customer demands for smaller, more fuel-efficient vehicles.

The company said Thursday it will start producing the Prius in late 2010 at a plant it is building in Blue Springs, Miss. Toyota already builds a hybrid version of the Camry sedan in Kentucky, but this will be the first time the Prius, which has been on sale for more than a decade, will be built outside of Japan and China.

The company will suspend production of the Toyota Tundra pickup at its San Antonio truck plant and the Toyota Sequoia sport utility vehicle at its Princeton, Ind., plant for three months starting Aug. 8 because of declining demand. Next spring, it will stop producing Tundras in Princeton and will consolidate all truck production in San Antonio.

The Princeton plant will now make the Toyota Highlander SUV, which originally was scheduled to be made in Mississippi. The Princeton plant will continue to make the Toyota Sienna minivan throughout the shutdown, Toyota spokesman Mike Goss said.

Toyota said it made the moves as U.S. demand for trucks and SUVs continues to decline due to high gas prices and the weak economy. Toyota's U.S. sales fell 21 percent in June compared with the year before, an even steeper decline than the industrywide slump of 18 percent. Sales of the Tundra were down 54 percent while sales of the Prius fell 34 percent as Toyota failed to keep up with growing demand.

"The truck market continues to worsen, so unfortunately we must temporarily suspend production. But this good news about production mix demonstrates our long-term commitment to our North American operations and to our team members, suppliers and communities where our plants are located," Jim Wiseman, vice president for Toyota Motor engineering and Manufacturing North America, said in a statement.

Officials in Mississippi cheered the announcement, even though it will delay the opening of the Blue Springs plant by several months.

"Mississippi thinks long term, and in the long term this is a grand slam home run," Gov. Haley Barbour said in a statement.

Toyota generally doesn't lay off its workers during shutdowns, as U.S. automakers do, and this will be no exception. Goss said the workers who build its trucks and SUVs as well as 891 workers based in Huntsville, Ala., who build engines for the Tundra and Sequoia will stay on the job through the shutdown. The San Antonio plant employs 1,900 people, while the Princeton plant employs nearly 4,500, although only 2,000 of those build the Tundra and Sequoia, Goss said.

"In our view, we don't just want to send everyone home because it makes for a bad startup condition when we start back in November," he said. "Beyond the investments we've made in buildings and equipment, we've invested a lot in our team members. It doesn't make sense for us to dismiss them."

Princeton plant spokeswoman Kelly Dillon said employees will be working on special safety and quality improvement projects during the shutdown.

"We will be doing extensive training during this time frame," Dillon said. Goss said some workers may also do volunteer projects.

Toyota has been dismissing temporary manufacturing workers who were employed at the plants, Goss said. The Princeton plant released 400 temporary workers last year, while the San Antonio plant will release 200 temporary workers by August. The Alabama plant also is releasing 70 temporary workers by August.

Goss said Toyota doesn't yet have a cost estimate for the changes. Since there is no equipment in Mississippi yet, the primary new expense will be retooling the Princeton plant to build the Highlander.

"We're very pleased in North America that we got this decision made expeditiously, because we had a couple of factories where we weren't utilizing the capacity and that's a concern," he said. "It's not an inexpensive deal for us to do this, but we think long term it's going to be a great investment."

Jim Schmidt, a director at the manufacturing research group Harbour Consulting Inc., said Toyota has some of the most flexible plants in the industry and should be able to convert its plants without major investments in new robots or paint shops.

"That's why when you see Toyota announce something like this, they can do it relatively quickly," Schmidt said.

Toyota has 13 North American plants and two under construction in Mississippi and Ontario. The automaker has more than 43,000 workers in North America.

Toyota's moves follow production cuts at General Motors Corp. and other automakers. GM said last month it is cutting shifts, reducing assembly line speeds and temporarily idling seven factories because of declining consumer demand for truck-based vehicles. Chrysler LLC has announced plans to close a minivan factory and cut a shift at a full-size pickup factory, while Ford has said it is cutting production for the rest of the year.